China, which on Thursday reported oil imports from Iran for the first time in a year, has offloaded the cargo into state reserves in the port city of Zhanjiang.

The move revealed by a trade source and ship tracking specialist Vortexa Analytics to Reuters on Thursday comes as the Biden Administration is locked in tough negotiations with Iran to revive a 2015 nuclear deal that will include the lifting of US sanctions on Iranian oil. The former Trump administration pulled out of the deal and re-imposed sanctions.

Iran, which sits on the world's fourth-largest oil reserves, relies heavily on oil revenue, but sanctions have prevented it from exporting at anywhere near capacity since 2018. Before US reimposed sanctions. Iran was selling more than 2 million barrels of crude per day.

The refilling of China's strategic petroleum reserves in the past few weeks also comes ahead of a plan to release oil from its emergency stockpile in a rare coordination with the United States to help cool global oil prices which hit a seven-year high this week. The high price of oil is helping fuel inflation around the world.

China has been importing Iranian oil under the radar which is not reflected in official customs data as buyers are fearful of invoking US sanctions. On Thursday, China's customs reported the first import of Iranian crude in a year despite ongoing sanctions.

China brought in 260,312 tons (1.9 million barrels) of Iranian crude oil in December, according to data from the General Administration of Chinese Customs, which last recorded Iranian oil inflows in December 2020 at double the volume.

A senior trade source with knowledge of the shipment told Reuters this particular cargo was offloaded into a state reserve site in Zhanjiang in late December.

This was followed by another similar-sized shipment that was discharged into the same port for the emergency stockpile, according to ship tracking specialist Vortexa Analytics.

"There were reports of importing Iranian crude earlier - but hush hush somewhat. Now I think the Chinese are testing openly to see US response," Tilak Doshi, managing director of Doshi Consulting in Singapore.

There have been no comments about the Reuters report by China or the US State Department.

"This is (China's) attempt to cool oil prices. It's basically to show the world that there's more supply even though it's only available to them," said a senior oil trader who declined to be identified as he is not authorised to speak to the media.

Unofficially, China's imports of Iranian oil picked up at the end of 2020 and have continued despite the sanctions that, if enforced, would allow Washington to cut off those who violate them from the U.S. economy.

Shipments had held above 500,000 barrels per day on average between August and October, as buyers judged that getting crude at cheap prices outweighed the risks of busting U.S. sanctions, Reuters reported in November.

To avoid the sanctions, Iranian crude has been exported to China marked as oil from Oman, the United Arab Emirates and Malaysia, squeezing out supplies from Brazil and West Africa, traders have said.

Imports from Iran have accounted for about 6% of China's crude oil imports, according to shipping data and traders' estimates.

China was expected to release some stocks from its strategic stockpile around the Lunar New Year, Reuters reported last week.

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